Bureau of Local Government Finance Opinion

February 13, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Edessa W. Delicano Municipal Treasurer Magallanes, Agusan del Norte M a d a m : This refers to your letter dated June 4, 1999 requesting a copy of our opinion/decision relative to the investigation conducted by our staff, Messrs. Eduardo E. del Rosario and Fidel C. Ibaez, on the issues behind the issuance of Resolutions Nos. 208-97 and 382-96 of the Sangguniang Panlalawigan of that province. It appears that some of the real property of EMCO PLYWOOD CORPORATION (EMCO for brevity) in that municipality such as Building I Slicing Plant, Building 2 Plywood Plant, Building 3 Cooling Tower, and Building 4 Power Plant, were omitted from the records during the conduct of the 1st general revision effective in CY 1994, pursuant to the provisions of R.A. No. 7160 otherwise known as the Local Government Code (LGC) of 1991. The said error was discovered during the conduct of the 2nd general revision in CY 1997. Hence, to rectify the error, a new tax declaration retroactive to CY 1994 was issued to EMCO together with a corresponding Notice of Assessment and a Statement of Real Property Tax for taxes due on the property for Cys 1994, 1995 and 1996 which amounted to P2,007,082.80 excluding penalties. ADCTac The taxpayer EMCO, in response requested for the grant of ten percent (10%) discount which was usually granted to it having been always prompt in the payment of its taxes since it started operation. EMCO further requested exemption from or condonation of the payment of penalties, alleging that EMCO was not at fault for failure to pay the said taxes due to omission of certain assessment records. The Sangguniang Panlalawigan of Agusan del Norte having been informed of the requests of EMCO passed Resolution No. 382-96 granting ten percent (10%) discount and Resolution No. 208-97 condoning the penalties on the subject properties of EMCO. Our staff who conducted the investigation thereat (on the premises of EMCO), in the company of the Provincial Treasurer and the Provincial Assessor of Agusan del Norte and the Municipal Treasurer and the Municipal Assessor, both of Magallanes, same province, have verified the occurrence of the aforementioned issues and also found that Building I slicing Plant and Building 3 Cooling Tower are no longer in existence at the time of said ocular inspection. Although such information was confirmed, the said representatives of this Bureau further submitted that "the said company could not provide documentary evidence as regards the specific date as of which the subject buildings 1 and 3 have ceased to exist." Moreover, the report of the said representatives disclosed that the allowable depreciation applied in computing for the market values of Buildings 2 and 4 is in accordance with the approved Schedule of Market Values of the Province of Agusan del Norte, hence the concurrence to the observation of the Provincial Assessor that "there is no need for (the) revaluation or correction of the (assessment of the) same." It is on record that EMCO tendered payment of tax in the amount of P485,063.96 that was acknowledged by the Municipal Treasurer of Magallanes under OR # 44787262 dated January 17, 1997 as partial payment for taxes due for CY 1994 reasoning that the Tax Declaration of the subject properties was not revised. It is also a fact that EMCO paid the remaining balance of P1,522,018.82 of the principal tax of P2,007,082.80, to the province of Agusan del Norte under OR # 9025094 dated July 10, 1997, as assessed by the Municipal Treasurer of Magallanes. Hence, it is obvious, as averred by the Provincial Treasurer of Agusan del Norte that "penalties were being condoned and the requested 10% discount was ignored. EaHATD Under the circumstances, it is noted that if EMCO in the first place is really not satisfied with the action of the provincial or municipal assessor in the assessment of its property as reflected in the new tax declaration and notice of assessment issued, EMCO may, within sixty (60) days from the date of receipt of the said tax declaration and written notice of assessment, appeal to the Board of Assessment Appeals of the province by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal, pursuant to Section 226 of the LGC. EMCO should not have resorted to the assessment of its own property as it did, for lack of authority or legal basis for the act. On the other hand, considering that the omission of the properties of EMCO from the records is not its fault, this Bureau holds, that EMCO should have been given a chance to pay the taxes on time without paying any penalty and be entitled to the benefits of paying on time. However, under paying situation, EMCO may have been allowed to pay the tax without penalty as provided under the 2nd paragraph of Section 222 of the LGC, which provides: "SEC. 222. Assessment of Property Subject to Back Taxes. . . . "If such taxes are paid on or before the end of the quarter following the date the notice of assessment was received by the owner or his representative, no interest for delinquency shall be imposed thereon; otherwise, such taxes shall be subject to an interest at they rate of two percent (2%) per month or a fraction thereof from the date of the receipt of the assessment until such taxes are fully paid." On the resolutions passed by the Sangguniang Panlalawigan of Agusan del Norte, as pointed out by the Provincial Prosecutor of the province under letter dated October 8, 1997, the law mandates that the grant of tax reliefs should be by an ordinance and not by a mere resolution to which this Bureau concurs. The Provincial Prosecutor allegedly anchored his opinion on the provisions of Section 192 of the LGC quoted below: "Sec. 192. Authority to Grant Tax Exemption Privileges. Local government units may through ordinance duly approved, grant exemption, incentives or reliefs under such terms and conditions as they may deem necessary." (Emphasis supplied) In view of the foregoing, this Bureau is of the view that the subject resolutions are null and void and may not be enforced. However, this is only an opinion and not a ruling on the validity or nullity of the subject resolutions considering that the power of review over tax ordinances and revenue measures of provinces and cities is no longer within the authority of the Secretary of Finance upon the effectivity of the LGC on January 1, 1992. It is therefore, incumbent upon the party, the Commission on Audit, as in this case, who questions the validity if the resolutions passed by the Sangguniang Panlalawigan of Agusan del Norte to ventilate their stand with the proper court. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director